Rajasthan High Court - Jaipur
Smt. Tara Devi vs Income Tax Officer on 24 April, 2000
Equivalent citations: (2001)68TTJ(NULL)361
ORDER
B.M. Kothari, A.M. This appeal by the assessee is directed against the order, dated 25-11-1993, passed by the Deputy Commissioner (Appeals) for assessment year 1992-93.
2. The first ground relates to confirmation of disallowance out of interest expenditure of Rs. 14,868. The learned counsel stated that interest-free loan of Rs. 50,000 was given to Shri Balkishan, husband of the assessee. The assessing officer observed that the assessee is paying interest of Rs. 42,830 and has not utilised the funds borrowed on interest for business purposes to the extent of interest free loan of Rs. 50,000 given to her husband. The assessing officer disallowed interest @ 18 per cent on the said loan of Rs. 50,000. Thus, the disallowance of Rs. 14,866 was made. The learned counsel submitted that no fresh borrowings on interest were made during the year under consideration. There is no nexus between the funds borrowed on interest with the aforesaid interest-free advances given to her husband. In the absence of nexus between the funds borrowed and interest-free advances given by the assessee, no such disallowance can be made. He placed reliance on decision of Tribunal, Jaipur Bench in the case of Accurate Pipes, 227TW 678, decision in the case of Kesarlal Chanda Lal v. Income Tax Officer (1981) 11 TTJ (Cal) 544 and decision in the case of CIT v. Hotel Savera (1998) 148 CTR (Mad) 585. The learned counsel strongly argued that the disallowances should be deleted.
3. The learned Departmental Representative supported the order of the Deputy Commissioner (Appeals) and relied upon the judgment of Hon'ble Calcutta High Court in the case of Tirupati Trading Co. v. CIT (2000) 158 CTR (Cal) 167 and CIT v. Vaikundam Rubber Co. Ltd. (2000) 158 CTR (Ker) 455: (2000) 241 ITR 50 (Ker).
4. We have carefully considered the submissions made by the learned representatives of the parties. A perusal of the balance sheet submitted by the assessee in the compilation shows that assessee's own capital was Rs. 1,59,419 as against which the interest-free loan given to her husband was only Rs. 50,000. The assessee contended that most of the interest-bearing loans were taken by the assessee in prior years and interest on such funds had been allowed as deduction in earlier years. This fact clearly proves the absence of any nexus between the funds borrowed on interest with the interest-free advances given to her husband. Even otherwise, the assessee's own capital was substantially more and she was entitled to withdraw the requisite amount out of her own capital and use it for any personal or non-business purposes also. The disallowance made out of interest expenditure is, therefore, not correct and justified. The facts of the judgments relied upon by the learned Departmental Representative are clearly distinguishable. It those cases, there was a direct nexus between the borrowed money and the amount invested without charging interest. No such direct or indirect nexus is established on the facts of the present case. We are, therefore, of the considered opinion that the aforesaid disallowance of Rs. 14,868 should be deleted. The assessing officer is, directed to delete the same.
5. The next ground relates to disallowance of Rs. 2,000 out of office expenses, Rs. 1,000 out of telephone expenses, Rs. 974 out of Luna and petrol expenses and Rs. 500 out of travelling expenses. Such disallowances have been made by the assessing officer on the ground of personal element involved in such expenses. The assessee's counsel contended that the proprietor is a lady and there is no question of any expenditure having been incurred for personal purposes. The learned Departmental Representative supported the order of the Deputy Commissioner (Appeals).
6. After considering the submissions made by the learned representatives of the parties, and after going through the orders of the learned departmental authorities, we are of the view that such petty disallowances made by the assessing officer and confirmed by the Deputy Commissioner (Appeals) are reasonable and justified. We do not find any justification to interfere with the view taken by the Deputy Commissioner (Appeals).
7. The next ground relates to confirmation of disallowance of Rs. 725 out of ESI. The assessee debited Rs. 2,314 on account of ESI expenses in the P&L a/c which, according to the assessing officer, includes a sum of Rs. 725 as contribution of employees. The assessee in the grounds of appeal has stated that there is no recovery from employees and total amount of ESI has been paid by the assessee out of its own funds. This factual position explained by the assessee has not been controverted by the learned Departmental Representative. The assessing officer is, therefore, directed to allow deduction in respect of such sum of Rs. 725.
8. In the result the appeal is partly allowed.